Understanding the Global Economy

How can I make good decisions?How am I influenced?

How can I be successful?

Study of how to meet unlimited competing

wants with limited resources

Economics

Think, Share

We all compete for resources

What are some competing wants in your family? Ex. Your sisters wants to buy a ______, but you want to buy a ______.

List 2 competing wants in our country?

Marketing Basics - How can I satisfy customers?

4

Products:Economic wants that you can buy

Goods

Tangible products, ex. Sports equipment

Services

Intangible products, ex. Live concert , movie

Think, pair, share

What are some things you want, but you can’t go to a store to buy?

Capital Money, buildings,

equipment, infrastructure – everything needed to start & operate a business

Labor All who work full or part

time, public or privateNatural/Land Land, coal, oil, trees,

water

ResourcesAll the things used in producing goods, services, buildings, ideas

Land, Labor or Capital Resource?

Land, Labor or Capital Resource?

Land, Labor or Capital Resource?

Difference between wants/needs and available resources

**key – makes us dependent upon each other globally

Scarcity

Think, Pair, Share

What percent of the world’s consumer’s DO YOU THINK live in the US?

Imports Goods and services purchased from other

countriesExports Goods and services sold to other countriesdeficit More imports than exportssurplus More exports than imports

Balance (of trade)The difference in value between exports and imports of a nation

Think, pair, share:

Does the US have more imports or exports?Does the US have a surplus or a deficit?

World Importswhat’s going on in this picture?

Prosperity Good time to start a new business, prices rise, economy is

flourishing (90’s)Recession Slow down for at least 6 months, companies reduce

workforce, prices are loweredDepression Long recession, hard to find a job, many businesses close,

very low pricesRecovery Business spikes up, people find jobs, demand for products

increases, prices increase

Business CycleStages an economy goes through due to recurring slow down and growth

example

EXAMPLE of the business cycle

Taxes Raise to gain money for govt, lower to give money to

citizens

Interest rate Raise to gain money for businesses, lower to gain

money for citizens

Social service programs Provide programs for economic stability for all citizens Ex. Welfare, food stamps, unemployment and job

services

Government Controlsattempts to control the economy by policy changes

Example of how it works…Gov’t lowers

taxes

People have more money to spend

People buy more things

Company’s make more money

Company’s hire more employees

or give raises

3 questions:what will be produced how will it be producedwho will receive it

Economic systemsHow gov’t answers the following questions determines their economic policy

Market economy/capitalism People answer – private

ownership, marketplace competition

Planned economy/communism

Gov’t answers – gov’t ownership, no competition

Mix economy/socialism Mix – almost all economies are

a mix

Types of Economic Systems:

Risks Potential for business loss or failure

Freedoms

Free Enterprise SystemEncourages individuals to start & operate their own businesses w/out gov’t

Think, Pair, Share

What percent of new businesses fail during their 1st year?

What is the #1 reason businesses fail?

ChoiceOwnershipProfitCompetition

Free Enterprise SystemFreedoms:

Where to work

what to buy

from whom

vote for govt leaders

Free Enterprise SystemFreedoms: Choice

Ownership Own your own

business and land

Free Enterprise SystemFreedoms: Ownership

Profit Money earned after all costs and expenses have been

paid

Owners get to keep this (rather than give to govt) incentive to take the risk of running the business

(still pay taxes though)

revenue Gross income from sales BEFORE costs and expensesexpenditures Costs, expenses and taxes incurred on a business in

order to operate

Free Enterprise SystemFreedoms: Profit

The profit incentive

Competition Struggle for customers between companies

Benefits of: Keeps prices low, more choices, better

quality, incentive to operate efficiently

Free Enterprise SystemFreedoms: Competition

Price Focuses on priceNon-price Focus other than price, ex. Customer service,

quality, gift wrap, location

Free Enterprise SystemFreedoms: Competition

Pure Infinite amount of competitors (like internet)

supply Businesses ability and willingness to sell products

demand Consumers ability and willingness to buy products

Equilibrium point When demand equals supply

Free Enterprise SystemFreedoms: Competition

Surplus/buyers mktMore supply than demand

– keeps prices low Ex. Corn/cornsyrup,

homes

Shortage/sellers mktMore demand than supply

– keeps prices high

Ex. Gas, hybrid cars

Surplus vs. Shortage

Surplus vs. Shortage

Monopoly One firm controls market for a give product

(local phone & cable companies)

Free Enterprise SystemFreedoms: Competition

Direct

Indirect

Free Enterprise SystemFreedoms: Competition

vs.

vs.

Direct or Indirect Competition?

vs.

Direct or Indirect Competition?

vs.

Direct or Indirect Competition?

vs.

Direct or Indirect Competition?

vs.

Direct or Indirect Competition?

vs.

Direct or Indirect Competition?

vs.

Explain economics Explain how the phases in a business cycle

effect SER industries Explain the concept of supply & demand Explain competition as it relates to SER

industries

Understanding the Economy